On page 22/23 of his work One Up On Wall Street, Peter Lynch explained why the stock market declines of 1990 bothered him a lot more than those of 1987: “While the 1987 decline scared a lot of people (a 35 percent drop in two days can do that), to me the 1990 episode was scarier. Why? In 1987 the economy was perking along, and our banks were solvent, so the fundamentals were positive. In 1990 the country was falling into recession, our biggest banks were on the ropes, and we were preparing for war with Iraq.”
When you see the prices of your non-cyclical stocks decline by more than 20%, the subsequent question that you should immediately ask is: Are the dividends and overall profits falling substantially, too?
Outside of the financial sector, the stock market crash of 2008-2009 was not accompanied by a joint decline in the … Read the rest of this article!
I know I have mentioned this several times over the past year, but I consider the business and stock performance of Adobe Systems, Inc. (ADBE) over the past decade to be one of the most instructive business case studies over the past decade. There is so much to learn about how a software company with solid 10-14% annual growth transformed itself to “Berkshire Hathaway in its early days” type of growth with its 23% annual earnings per share growth over the past six years as it has transitioned aware from a permanent licensing to a monthly subscription-based model for generating revenue.
For investors who correctly identified this trend and purchased shares accordingly, the results have been significant, with $1 of investment growing into between $11 and $20 each depending upon the specific entry point of the investment during the past decade or so time frame.
As a result, I have … Read the rest of this article!